Dauch Corporation 2026 Q2 Earnings Call

Thank you, Rocco, good morning, everyone. I'd like to welcome everyone who is joining us on Dauch Corporation's second quarter earnings call. Earlier this morning, we released our second quarter of 2026 earnings announcement. You can access this announcement on the investor relations page of our website, www.dauch.com, and through the PR Newswire services. You can also find supplemental slides for this conference call on the investor page of our website. A replay of this call will be available through August 14th. Replay details are in today's press release. Before we begin, I'd like to remind everyone that the matters discussed in this call may contain comments and forward-looking statements that are subject to risks and uncertainties, which cannot be predicted or quantified and which may cause future activities and results of operations to differ materially from those discussed.

For additional information, please reference slide two of our investor presentation or the press release that was issued today. During this call, we may refer to certain non-GAAP financial measures. Information regarding these non-GAAP measures, as well as a reconciliation of the non-GAAP measures to GAAP financial information, is available in the presentation. Let me turn things over to our Chairman and CEO, David Dauch.

Thank you, David, good morning, everyone. Thank you for joining us today to discuss Dauch's financial results for the second quarter of 2026. Joining me on the call today is Chris May, our Executive Vice President and Chief Financial Officer. The company's strong second quarter results highlight the continued positive acceleration for the new Dauch Corporation. We are focused on unlocking the full strategic potential of the transformational acquisition as we continue to successfully implement our integration plan to drive value creation and leverage our enhanced size and scale. So far, I'm very pleased with the robust start. As for today's agenda, I'll review the highlights of our second quarter financial performance. Next, I'll touch on our synergy progress, some business updates, commentary about the industry, and our guidance. I'll then turn the call over to Chris to cover the details of our financial results.

After which, we will field any questions that you may have. Let's begin with some of the details. The company's second quarter of 2026 sales were approximately $3 billion. Adjusted earnings per share was $0.32, and adjusted free cash flow was approximately $148 million. In the second quarter, North American production was flat year-over-year. Europe was down approximately 1%, and global production was also flat. Our quarterly performance reflects continued strength across a number of important customer programs, including BMW's CLAR platform that underpins the brand's X5 and X7 models, Volvo's SPA crossover utility vehicle platform, and GM's large truck program. From a profitability perspective, our adjusted EBITDA in the second quarter was $390 million, or 13.2% of sales, driven by mix, business performance, synergies, and a solid Dowlais contribution. Chris will provide more details about our overall financial performance during his prepared remarks.

On slide four, I'd like to share an update on our synergy and value capture progress. We have now been operating for five months as a combined company, and we have already realized approximately $70 million of run rate savings to date. We remain on target to deliver more than $100 million in run rate savings by year-end. We have made excellent progress in eliminating duplicative corporate costs, optimizing SG&A, and capturing global engineering efficiencies. At the same time, we're advancing initiatives across procurement and operations, which naturally take longer to realize. While significant opportunities remain ahead, I'm proud of the strong progress our team continues to make. As we have previously communicated, we expect to deliver approximately $180 million in run rate savings by the end of year two and the full $300 million in run rate savings by the end of year three.

Let me talk about some business updates, which you can see on slide five. We want to highlight that our company was named a Ford Supplier of the Year Award recipient in the quality category for our outstanding performance, dedication, and collaboration during the 2025 fiscal year. The recognition reflects a collective effort across our organization to deliver excellence to our customers as they are the center of everything that we do. We are incredibly proud to receive this award. In addition, in the second quarter, we won numerous awards with major European, Asian, and North American customers, supporting not only mainstream vehicle segments but also high-end sports cars and lifestyle off-road capable vehicles. We are now seeing the strength and the comprehensiveness of our product portfolio. Lastly, we continue to build a strong pipeline of future growth opportunities.

Today, we are actively quoting more than $2 billion of new and incremental business, including capacity uplifts on high-demand programs. Additionally, we are also working to secure next-generation platforms and program extensions. We remain disciplined in pursuing opportunities that align with our strategy and support our long-term profitable growth. Now let's talk about the industry. There are two topics I wanted to discuss with you specifically. First, on the macro environment. In the second quarter, we experienced some incremental costs related to the elevated energy prices, but we did not see any noteworthy impact on our operations, nor on our customer schedules. From a high level, we did not experience significant mix change, possibly pointing to consumer resiliency, especially here in the U.S. In general, overall production has been stable, and we continue to experience the strength of the North American truck segment.

Second, we are actively monitoring the USMCA trade discussions and will react accordingly once discussions are finalized. We understand that the parties are moving into a period of annual review and are currently in active negotiations. This trade relationship is critical to the success of the auto industry and specifically to the North American region. As we have shared in the past, our strategy is to buy and build local in the regions that we serve, and we have benefited from this approach and will continue to do so. Now let's talk about our updated full-year guidance. We have lifted the low end of our guidance range to take into account our performance through the first half of this year. Additionally, we are managing meaningful launches in the second half of the year.

The company now targets sales of $10.6 billion-$10.8 billion, adjusted EBITDA range of approximately $1.36 billion-$1.425 billion, adjusted free cash flow of approximately $260 million-$325 million. Our guidance ranges are underpinned by the following production assumptions: North America production at 15.1 million units, Europe at 16.9 million units, China at 31.6 million units, and global production at approximately 91.1 million units. As we have shared before, our outlook is based on not only industry production, but also on certain programs that we have meaningful content on. We note that GM is transitioning to its next-generation full-size truck program. We expect the model changeover to begin during the second half of this year. The new truck is very exciting and an important product both for GM as well as for us, and we look forward to successfully supporting our largest customer.

Before transitioning to Chris, I want to share with the investment community that we will be hosting a Capital Markets Day on November 17th in New York City. We will provide additional details about the event in the coming months, so please mark your calendars. In summary, we had an excellent second quarter. The integration of Dowlais continues to progress favorably. Our synergy achievement is on track, and we are excited about our future, and we are built to perform. Now let me turn the call over to our Executive Vice President, Chief Financial Officer, Chris May, for the financial results and details.

Thanks. Thank you, David, and good morning, everyone.

I will cover the financial details of our second quarter 2026 results and our updated guidance with you today. I will also refer to the earnings slide seven as part of my prepared comments. In the second quarter of 2026, our sales were $2.96 billion as compared to $1.54 billion in the second quarter of 2025. Slide seven shows a walk of second quarter 2025 sales to second quarter 2026 sales. Overall, our sales were flat year-over-year and in line with changes in overall North American production levels. The divestiture of our India commercial vehicle axle business also had a $34 million sales impact in the quarter. This was offset by metal market passthroughs and FX, which increased sales by approximately $35 million.

About a third of this amount was related to FX and was driven by the strengthening of the Brazilian real and the EUR. Dauch contributed $1.45 billion in gross sales for the second quarter. Versus the second quarter of last year, volume, mix, and other was favorable by $42 million, driven by positive demand for our products that supply BMW and Volvo, which was partially offset by $31 million of lower sales due to the sale of certain businesses. Let's move on to adjusted EBITDA. For the second quarter of 2026, adjusted EBITDA was $389.6 million, and adjusted EBITDA margin was 13.2% versus $202 million and 13.2% last year. You can see a year-over-year walk down of adjusted EBITDA on slide eight.